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Question 1: Clark bought Series EE U.S. Savings Bonds after 1989. Redemption proceeds will be used for
payment of
college tuition for Clark's dependent child. One of the conditions that must be met for tax exemption
of
accumulated interest on these bonds is that the:
A. Purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her
spouse).
B. Bonds must be bought by a parent (or both parents) and put in the name of the dependent child.
C. Bonds must be bought by the owner of the bonds before the owner reaches the age of 24.
D. Bonds must be transferred to the college for redemption by the college rather than by the owner
of the
bonds.
Correct Answer: A
Explanation
Choice "a" is correct. One of the conditions that must be met for tax exemption of accumulated
interest on
the bonds is that the purchaser of the bonds must be the sole owner of the bonds (or joint owner
with his
or her spouse).
Choice "b" is incorrect. The bonds must be bought and put in the name of the owner or co-owner,
not in
the name of the dependent child.
Choice "c" is incorrect. The owner must be at least 24 years old before the bonds issue date.
Choice "d" is incorrect. There is no requirement that the bonds must be transferred to the college for
redemption by the college rather than by the owner of the bonds.
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